Made to Stock

Made to Stock Manufacturing

This organization is a make-to-stock (MTS) business of over 400 employees and over $100 million in revenue. Although profitable, their growth rate over the previous three years had been substantial with many new employees in both production and the office. The business is highly regulated (Food & Drug audit requirements in two countries) which requires material lot traceability.

Root Causes of Complications

You might think there were stock shortages causing the shipping issue. Less than one percentage of the missed shipments was due to stock outs or other operational issues. The major issue was the “sales order on credit hold” process which was paper-based (estimated 6,000 sheets of paper annually) which took an average of 13.2 business hours to clear (customer expects shipments the next day).

Customer service would forget to print a copy and take it to accounting

Paper would get lost

Accounting would ‘get around to it’

Accounting would misfile the paper

Accounting would authorize the order but forget to print the sales order pick list

Inventory movement tags were gathered at the end of each shift and input the next day

Tags would be lost or not created at all

Purchase order receipts would need to be input prior to any movement tags

Transposition errors would stop entry (lot number not found for product)

Leading Indicators of Complications

Customers service representatives were increasingly raising concern that shipments were not going out on time and customers were calling to complain.

Some sales orders were cancelled

Premium freight costs were incurred to expedite delivery

Actual hit rate for on time shipment: 86.3%

Inventory movement tags, when entered into the ERP system, would often produce error messages which would need to be resolved in order to complete the transactions.

There was one full time person that input and ‘fixed’ the inventory tag issues

The method of ‘fixing’ the inventory tags would never have passed an FDA audit

If a ‘rush’ production order was coming through and shipped, the sales bill of lading would need to be manually created as the system would not have the product lot in the finished goods warehouse

If a ‘rush’ purchase order came in and was immediately taken to production, the entry of the work order execution information would be delayed.

Solution

A business management process that integrated to their ERP system.

Escalation feature in process automation ensured that all sales orders on credit hold were actioned within three business hours of entry

Authorizing shipment automatically produced the sales order pick list in distribution

Eliminated 6,000 sheets of paper usage and storage (in accounting)

Over 150 kilometres (95 miles) of human movement

673.3 hours of human effort (combined sales and accounting)

$15,041 annual savings of customer service productivity

Over 60% of premium outbound freight costs

New hit rate for on time shipment: Over 99%. Happy customers and less stress on employees

Other Benefits:

The organization invested in RFID technology from receiving through the warehouse and production and into shipping.

Enabled:

Real time tracking of inventory movement

Inventory movement also recorded employee ID of material handler and production stations utilized

Reassignment of one full time employee to more productive usage

Automation of sales order pick list onto mobile devices located on the material handling units in shipping (more paper saved and more accurate pick and ship actions)

Green benefits:

Eliminating the paper usage reduced carbon emissions

Reducing the premium outbound freight also reduced total number of transportation trips reducing carbon emissions

The organization continues to grow and does so with less stress, less business risk and more confidence. Profitability margins continue to grow.